TSP

TSP participants will be able to set aside another $500 in 2020 because the elective deferral limit was increased from $19,000 to $19,500. For FERS employees who are maxing out their TSP contributions and want to have a contribution in every pay period to ensure they do not lose any matching contributions, this translates to $750 a pay period in a 26 pay period year and $723 a pay period in a 27 pay period year.

For those 50 and older (including those who turn the age of 50 in 2020), the “catch-up” contribution has also increased by $500 to $6,500. As there are no matching contributions on catch-up contributions, there is no need to stretch them out over the year.

Things will be different when 2021 rolls around. At that time the TSP will allow “spillover” contributions, which will combine the regular and catch-up contributions. Watch for more information from the Thrift Board during the upcoming year. If you don’t already do so, like the TSP on Facebook and/or follow it on Twitter; you’ll get frequent updates on changes and other items of interest.

There are changes for Individual Retirement Arrangements (IRAs) in 2020 as well. The contribution limits are not among the items that have changed; they remain at $6,000, with $1,000 extra allowed as a catch-up contribution for those 50 and older (including, like with the TSP, those who turn 50 during the year). The items that have changed are income restrictions that apply to 1) being able to deduct your contributions to a traditional IRA; and 2) being able to contribute to a Roth IRA.

An individual who belongs to a retirement plan at work – a group that includes all federal employees, is prohibited from deducting contributions if their income is above a certain limit.
• An individual whose filing status is single may fully deduct traditional IRA contributions if their income is below $65,000 and may not deduct any contributions if their income is above $75,000.
• An individual whose filing status is joint and whose spouse also belongs to a retirement plan at work may fully deduct traditional IRA contributions if their joint income is below $104,000 and may not deduct any contributions if their joint income is above $124,000.
• An individual whose filing status is joint and whose spouse does not belong to a retirement plan at work is held to the above limits, but may fully deduct traditional IRA contributions for their spouse if their joint income is below $196,000 and may not deduct any contributions if their income is above $206,000.

When it comes to a Roth IRA, there are limits on being able to contribute at all. Please note these limits do not apply to contributions to the Roth TSP
• An individual whose filing status is single may fully contribute to a Roth IRA if their income is below $124,000 and may not contribute at all if their income is above $139,000.
• An individual whose filing status is joint may fully contribute to a Roth IRA if their income is below $196,000 and may not contribute at all if their income is above $206,000.

You want to be especially careful with IRA contributions, as you could end up owing tax and, perhaps, penalties if you contribute to a Roth IRA when you shouldn’t have, or if you attempt to deduct contributions to a traditional IRA when you are prohibited from doing so. The TSP won’t let you over contribute, but, if you’re not careful and reach the elective deferral limit prior to the end of the year, you might miss out on some government matching contributions. We want to follow the sage advice given us by our second grade teachers – PAY ATTENTION!

More on the TSP and vesting contributions at ask.FEDweek.com